AstraZeneca puts $6.9B on the table for a Daiichi Sankyo cancer drug

AstraZeneca is willing to bet nearly $7 billion on an antibody drug conjugate out of Japanese pharma Daiichi’s pipeline as it looks beyond checkpoint inhibitor Imfinzi.

The nuts and bolts of the deal are this: Daiichi gets a pretty major $1.35 billion upfront, although this is still heavily backloaded with a $5.5 billion biobucks promise, should everything go to plan, with $1.75 billion of this coming from potential sales.

What’s this huge chunk of change going on? Daiichi’'s lead antibody drug conjugate (ADC), [fam-] trastuzumab deruxtecan (DS-8201), which is in tests for HER2-expressing cancers, including breast and gastric cancer, as well as in non-small cell lung and colorectal cancer.

Under the deal, both pharmas will jointly develop and sell the drug, should it get approved, as both a monotherapy or as part of a combination, except in Japan where Daiichi hangs on to exclusive rights. It’s also solely responsible for the manufacturing and supply of the therapy.

Analysts at Jefferies said in a note to clients this morning: “We see the strategic rationale for AstraZeneca to bolt-on trastuzumab deruxtecan to its key oncology portfolio, potentially providing a contribution from 2020E with upside optionality from future wider indications.

“The deal structure partly mitigates the financial risk, in our view, but $1.35bn upfront plus significant future milestones likely necessitates blockbuster peak sales to deliver a return, albeit exclusivity is expected into the 2030s.”

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The drug has an FDA breakthrough tag and fast track label (what doesn’t these days) for several cancer targets and is made up of Roche's Herceptin HER2-targeted antibody and a topoisomerase I inhibitor payload.

How has it performed to date? In a phase 1, in patients with HER2+ breast cancer who had been treated with Roche’s next-gen breast cancer drug Kadcyla, HER2+ gastric cancer post-Herceptin, and other HER2+ expressing solid tumors, Daiichi/AZ’s drug saw an overall response rate (ORR) of 50.6% (81/160) with the highest ORR in HER2+ breast cancer (64.2%) and slightly less response in HER2 low expressing breast cancer (59.4%). The median duration of response was not reached.

Grade 3 or higher adverse events were experienced by 46% of patients (93/200) and two cases of grade 5 interstitial lung disease were reported. The drug is currently in a series of trials across several cancers across all three stages of clinical development.

ADCs are designed to deliver chemo payloads to cancer cells via a linker attached to a monoclonal antibody, which binds to a specific target on cancer cells.

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But the ADC field has been a mixed bag in terms of results to date: Just this week, Astellas and Seattle Genetics said they are prepping to file for FDA approval of their drug enfortumab on the strength of phase 2 data. This trial, data from which was posted this week, linked the antibody-drug conjugate to a 44% response rate in patients with locally advanced or metastatic urothelial cancer.

The pair is looking at dominating the emerging post-immune checkpoint inhibitor space—as is Immunomedics and its ADC, IMMU-132. Although this ADC has endured a rocky path, being knocked back by the FDA in triple-negative breast cancer, it is advancing in metastatic urothelial cancer.

A pivotal trial started last year, and an early study linked IMMU-132 to a 31% response rate.

The promise shown by the ADCs in urothelial cancer contrasts with setbacks to the broader field. Over the past year, AbbVie terminated a trial of an ADC it acquired in the Stemcentrx takeover, and yesterday it was revealed that they are axing 178 staffers from the biotech amid the failure of Rova-T. And ADC Therapeutics has also recently canned a study of one of its prospects in HER2-positive cancers.

Both Daiichi and AstraZeneca will hope for better luck.

RELATED: Doubling down on R&D, Daiichi makes executive changes across its U.S. research unit

This all comes amid R&D changes for both companies in recent times: Daiichi has shuttered a 170-person Indian R&D site and back in 2017 turned the ax on R&D staffers in its native Japan, culling its research subsidiary known as Asubio Pharma.

The unit had around 150 employees that worked on psychiatric and neurological diseases, immune and inflammatory diseases, and regenerative medicine, some of which were said to be moved around the company’s other R&D units around the globe.

Japan and India joined R&D units in the U.K. and Germany on the list of those axed by Daiichi over the past few years.

But whilst sharpening the ax of some R&D sites, Daiichi has also been sharpening its pencil, signing a string of oncology deals designed to give the company a pipeline of candidates that can increase success rates in the clinic.

One of the more high-profile of these agreements is the deal with Kite Pharma (now a part of Gilead), which gave Daiichi the rights to CAR-T drug Yescarta (KTE-C19) in Japan, as well as its doubling down on I-O work with Zymeworks.

This year it also looked to double down on its research units with movement up the top: Junichi Koga, Ph.D., recently became the company’s new global head of R&D, taking over from Glenn Gormley, M.D., Ph.D., who had served as senior executive officer of the Daiichi Sankyo Company as well as president and CEO of Daiichi’s U.S. division.

Gormley has, in fact, stepped down from all of these positions but stays on as chair of Daiichi and as a special adviser to its global CEO Joji Nakayama “on R&D matters.”

AstraZeneca, meanwhile, also recently changed things up with its R&D unit: After an exodus of executives over the past year or so, the British-based pharma hired controversial scientist José Baselga to run its newly formed cancer-focused unit, where the new ADC development will sit.

At the same time, Mene Pangalos, who was previously responsible for the company’s Innovative Medicines and Early Development Biotech Unit, took the helm at another new unit, the Research and Development unit for BioPharmaceuticals, which focuses on research for CV, renal and metabolism and respiratory—i.e., most of its work outside cancer.